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A New Deal for Unemployed Australians?

Dan Finn

Reader in Social Policy, University of Portsmouth

D E C E M B E R 2 0 0 1

Dan Finn is an expert on employment programs and the benefit system. At the University of Portsmouth,where he is a Reader in Social Policy, he leads research projects into unemployment, the New Deals andwelfare to work strategies. Between 1997 and 2001 he was a member of the Advisory Group for the UKNew Deal Task Force and a Special Advisor to the House of Commons Education and EmploymentSelect Committee. Between January and May 2001 he was an Honorary Research Fellow at theUniversity of Melbourne where he carried out research into the Jobs Network, Centrelink and Work forthe Dole. His research was funded by the Leverhulme Trust.

Dan may be contacted via email dan.finn@port.ac.uk or alternatively, you may contact Dr JohnSpierings of the Dusseldorp Skills Forum via email john@dsf.org.au or at his Melbourne office (03) 96397211.

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Executive Summary

The rights and responsibilities of unemployed Australians are being redefined.The Government has created a privatised employment placement market,introduced new �mutual obligation� programs, and has embarked on radicalchanges in the social security system. This paper does not assess the relativemerits of these individual policies but contributes another perspective bycontrasting the emerging Australian approach with the British New Deals for theunemployed. This has value not just because of the long tradition of policytransfer between both countries but because since 1997 the British system hasgone through a remarkable period of innovation and renewal.

The paper draws on a broad range of documentary and other evidence toexplore the strengths and weaknesses of both systems. While acknowledging thedifficulty of drawing out the lessons that one country specific approach mayhave for another the paper arrives at the following conclusions:

1. Centrelink has demonstrated that it is a high performance, innovative publicsector agency. However, the Australian system needs a stronger, more directpersonal and administrative connection between benefit eligibility, job searchand participation in labour market programs. These weaknesses wereexplored in the McClure report but the limited personal adviser service that itproposed should be extended to all the long term unemployed.

2. The Australian system relies on automated program referrals. This may be

technically sophisticated but it is not getting the message across to significantnumbers of clients. Mandatory attendance at adviser interviews in Centrelinkwould generate the same �shake out� effect secured by the existing system,but it would also ensure that appropriate and matched referrals were takingplace, and they might reduce the excessive breaching that is being generatedby the existing system. At the same time, front line Centrelink advisers shouldbe the focus of an organised �follow through� employment assistance processfor the unemployed people who are not placed in jobs through theirprograms but who currently �go back to zero� when they return to theunsupported job search regime.

3. The most basic function of an employment service is to provide access to

vacancies and other labour market information. Unemployed Australians canaccess notified vacancies through a computerised system but Job Matchingproviders usually retain the details. This may mean physically registering withseveral providers, in different locations. This can cause inconvenience,especially if the vacancy is filled, and it creates new rigidities in the labourmarket. It also seems perverse that unemployed people cannot access theinformation they need from their �one stop� Centrelink office! Strategically, itwould be more appropriate to re-integrate basic job matching and vacancyhandling into the core public service agency that most benefit recipients haveregular contact with. This could enhance the service that Centrelink can offer,enable it to utilise the new technologies that are transforming the jobmatching process, and free up Job Network members to focus on placing

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those who have significant employment barriers. 4. The Job Network may secure more cost effective results but many providers

focus solely on entry level jobs and the majority of Intensive Assistanceparticipants return to unemployment. Output related payments need to besupplemented with other mechanisms to ensure that providers place greateremphasis on improving job �retention� strategies; on making the first job intoa better job; and on a �follow through� process, to get effective assistance tothose who come to the end of their placements without a job. In this context itwould be valuable to learn lessons from some of the high performancewelfare to work �intermediaries� that are emerging in the USA and UK whichare both client focused but also employer/demand led.

5. Competitive pressures in the Job Network have reduced transparency and

limited the capacity of Government and providers to share knowledge aboutsuccessful back to work interventions. The capacity of the system would beenhanced by a more open evaluation strategy designed to extract and extend�good practice� as much as it is concerned with measuring broad impacts. Acomplementary suggestion would be to adapt the competitive British NewDeal Innovation Funds which act as a stimulus to test local solutions but theresults from which are publicly available to all providers.

6. Both the UK and Australia have stressed the significant role to be played by

broad partnerships if welfare reform is to become a worthwhile reality. Yetthe Australian employment assistance and participation system is competitiveand fragmented, partnership arrangements are weak, and there are fewlinkages between federal and state programs. Stronger local partnerships areneeded, especially in areas of highest unemployment, to both �join up� existingmultiple local interventions, create synergies and avoid duplication.

7. The emerging Australian system is sending mixed messages to the

unemployed and those working with them. The combination of selectiveemployment assistance, participation focused mutual obligation requirements,and various exemptions and exclusions, is creating a confusing and complexhybrid, especially for the younger long term unemployed. The British NewDeal offers no simple �off the shelf� solution, but the progress made doesillustrate the gains that can come from a comprehensive approach to all thosewho reach a certain duration of unemployment. It may not be a revolutionbut simply introducing Centrelink employment advisers and systematically�joining up� existing job search, employment assistance, Work for the Doleand training programs into a comprehensive job focused system could start todeliver something like a New Deal for long term unemployed Australians.

Finally, employment programs and benefit regimes matter. Whether it be theinclusive, citizenship based, New Deal model, or the selective assistance of theJob Network, the principle of helping those at a disadvantage in the labourmarket is relevant at all stages of the economic cycle. In most areas the labourmarket is not static and even at the lowest point of recent recessions most peoplewho become unemployed still leave unemployment quickly. The task is to

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ensure that all those who become detached for longer periods are giveneffective assistance so that they are not excluded from the opportunities that doarise especially when economic growth generates new opportunities. That is thechallenge that must be met more effectively by the emerging Australian �welfareto work� system.

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Introduction

The long term unemployed get a raw deal in both Australia and Britain. Someare young people with few qualifications trying to break into secureemployment. Others are older workers who have lost traditional jobs and skillsdue to employment change. Most live in poverty, especially if they havedependents. Few have marketable skills and they face discrimination byemployers. They all experience significant employment barriers, whether theybe a consequence of individual personal characteristics or of local labour marketconditions, or a combination of both.

Long term unemployment has also had negative consequences for the economyand for the broader social fabric of both countries. Maintaining a large numberof the unemployed out of work for a long time is expensive, in terms of socialsecurity expenditure, foregone tax revenue and other indirect costs, andeconomists have frequently drawn attention to the way in which long termunemployment acts as a �drag anchor� on the operation of the macroeconomy(Chapman, 1998; Layard, 1999).

In both countries there is now a consensus that positive Government action isneeded to re-engage the long term unemployed with the labour market becausethe problem will not be �solved� simply through employment growth andmarket forces. However, there is far less consensus about which programs andwhich delivery structures will be most effective in helping to reduce the barriersfaced by the long term unemployed. In Britain the Labour Government hasopted for a �New Deal� for the unemployed which has similarities with the JobCompact which was introduced by the last Australian Labor Government. InAustralia the Liberal led Coalition Government has opted for labour marketderegulation and the radical privatisation of what used to be the CommonwealthEmployment Service (a strategy now advocated by the British ConservativeParty).

The impact of the privatised Australian Job Network has been the source ofmuch national controversy and international interest. The OECD has recentlycompleted an exhaustive study and many of the major concerns about theNetwork are now being scrutinised in a Government review. There is also anindependent ACOSS review into the marked increase in social security breachingand sanctions associated with the Network.

The aim of this paper is not to rehearse all of these debates or the evidence onwhich they are based. Instead, the objective is to contribute another perspectiveby comparing and contrasting the Australian approach with the British NewDeals for the unemployed. This is of value not only because there is a longtradition of policy transfer between British and Australian political andadministrative elites, but because since the election of the New LabourGovernment in 1997 the British system has been going through a remarkableperiod of innovation and renewal. In particular, just as the British have tried toabsorb the policy lessons from the Australian Job Compact, and the subsequentprivatisation of the employment placement market, it may be that Australia can

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learn valuable lessons from the New Deals and from the British �employmentfirst� work based Welfare State.

The following sections compare and contrast the employment assistance systemsthat are being implemented in both countries. It initially describes the verydifferent approach that each country has taken in restructuring their publicemployment and benefit payment services and their employment programs forthe long term unemployed, especially for young people. It then assesses theevidence on the impact of the New Deals, the lessons that have been learnt aboutwhat works, and then extracts some of the findings that may be of relevance tothe next stages of Australian welfare reform.

Welfare to Work Regimes, the Public Employment Service andFront Line Advisers

The new welfare to work regimes being created in both Australia and Britain arenot just about the abstract creation of employment programs and workincentives. Both Governments have coupled policy with organisational reformand have linked the transition to active benefit regimes with radical changes inthe bureaucracies that deliver and administer programs. This modernisationreflects the need to adapt services in response to fundamental changes inemployment, in information technologies, and in how people get jobs. It is also aresponse to the growth of long term unemployment, social exclusion andwelfare dependency. These organisational reforms have been associated withthe introduction of new management techniques and contractual arrangementsdesigned both to increase efficiency, reduce costs, and ensure that these agencies,and their contractors, are more responsive to meeting the needs of the longerterm jobless. To service this evolving approach specialised employment advisersor case managers have increasingly been introduced by agencies to create newfront line services providing the gateway to programs, jobs and support at thesame time as enforcing the new active obligations of those receiving benefits.

However, while they may share abstract objectives there are significantdifferences in the ways in which both countries are shaping and implementingreform. In Britain New Labour has introduced a range of New Deal programswhich are at the forefront of its strategy for creating an �employment first�Welfare State. The New Deals for the unemployed provide structuredemployment assistance which all individuals are required to participate in aftercertain durations of unemployment. This approach was in part modeled on theWorking Nation �Job Compact� but it also reflects the commitment that allEuropean Union countries have now made to introduce similar �guarantees� forthe long term unemployed. By contrast, the Coalition Government dismantledthe �Job Compact� in 1996 and replaced it with varying levels of selectiveemployment assistance allocated according to a complex classification system.This selective assistance was subsequently supplemented by programs linked toa �mutual obligation� which now require most long term unemployedAustralians to participate in a range of socially useful activities including, forthose aged up to 40, �Work for the Dole�.

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The difference in employment programs is matched by the very differentapproaches that both countries have taken in reforming their traditional publicemployment services. Australia was the first OECD country to opt for a fullyprivatised employment placement market whereas New Labour is broadlycommitted to reforming, not replacing, the front line public sector agencieswhich deliver employment assistance and state benefits.

From Working Nation and the Job Compact to the Jobs Network

The last Australian Labor Government instituted its Working Nation strategy inMay 1994 as a response to the rising long-term unemployment of the early1990s. A key economic and social objective was to ensure that all the long termunemployed would have access to programs that would improve theiremployability and enable them to compete for the new jobs being generated byemployment growth.

The Job Compact was the centrepiece of Working Nation. It guaranteed at least atemporary job offer to individuals who were at risk of long term unemploymentor who had been in receipt of unemployment allowances for 18 months or more.At risk clients were identified through a new classification system. Eligible clientswere then served through a competitive case management system deliveredthrough a mixed economy of providers. This started to open up theCommonwealth Employment Service (CES) to competition and externalregulation through the Employment Services Regulatory Authority. Oncereferred to a provider by the CES, the client was evaluated by a case managerand entered into a Case Management Activity Agreement. The agreement wasopen-ended, included a return-to-work plan and required the client to accept asuitable offer of unsubsidised or subsidised employment or a place on asubsidised work experience project. Through the agreement, case managerswere expected to tailor a package of activities designed to improve theindividuals� employability and prospects for sustained employment. A jobseekerwho failed to attend or abide by the terms of the agreement risked a benefitsanction.

Working Nation was originally intended to be a four-year program. However,barely two years after implementation the Job Compact was scrapped by the1996 Coalition Government. The new regime argued that the Compact had beenineffective in reducing unemployment, was too expensive, and that theprograms were simply �churning� the unemployed rather than placing them invacancies. Their analysis seemed to be confirmed by a subsequent Departmentalevaluation of the program (DEETYA, 1997).

These evaluation results were controversial. Australian economists have sincecriticised the post program methodology used, suggesting that it did not controlfor bias and used an inadequately selected control group. By contrast, Strombackand Dockery (2000) used a more rigorous matched control group method

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drawing on data from the curtailed �Survey of Employment and UnemploymentPatterns� which was initiated in 1994 to assess the impact of the Job Compact.Their results suggested that participation in a labour market program almostdoubled the chance of someone leaving job search to enter employment. Theirduration analysis also suggested that �brokered� work experience programswere markedly more effective than the 1997 Departmental evaluation suggested(Stromback and Dockery, 2000). Nevertheless, even though proponents of theJob Compact argue that it did help reduce long term unemployment theyrecognise that the program had significant weaknesses, especially in how it wasimplemented (Chapman, 1998).

The Coalition Government, Centrelink and the Job Network

The 1996 Coalition Government was elected on a radical platform aimed attransforming the Australian labour market. A key element of this strategyinvolved redefining the rights and responsibilities of the unemployed. The jobsearch obligations of the unemployed were increased and a Common YouthAllowance was introduced. The �Job Compact� was scrapped and the budget forits related employment programs was reduced, resulting in a 50% cut in totalspending on active labour market programs (OECD, 2001, p. 13). A fullycontestable employment placement market was created and the CES wasprivatised. The aim of the Government�s new approach was to get people into�sustainable employment� and �to build new relationships rather than newbureaucracies and to create new networks rather than new institutions� (Abbot,2001, p. 3).

However, a new public sector agency, Centrelink, was given a key role. This�one stop� shop to the benefit system was given responsibility for the assessmentand payment of unemployment benefits and for ensuring that unemployedclaimants meet their job search and other obligations. Centrelink also acts as thegateway to the fully privatised �Job Network�. However, although Centrelinkstaff administer work tests and assess levels of employability the agency playsno active role in finding or filling vacancies. Research visits by the author toCentrelink offices confirmed that they have few job search facilities available,their staff have little experience of the employment market and nearly all theagency�s performance indicators are focused on benefit processing and payment.Nevertheless, Centrelink is the main point where unemployed people areassessed and notified that they may have to participate in certain programs,although the direct process that informs the individual when they have to attendis highly automated, especially for programs like Work for the Dole. Theweaknesses of this referral process have been a constant source of friction, with�no show� rates for particular programs ranging from 30 per cent to 60 per cent(OECD, 2001, p. 134). Not only has this had an impact on the management andviability of individual providers, but it has been a major factor behind the sharpincrease in administrative benefit sanctions imposed on those who fail to attend(ACOSS, 2001).

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Unemployed Australians now rely heavily on the privatised Job Network foraccess both to employment assistance and for information about vacancies. In itsfirst phase the Network was made up of over 300 government, community andprivate organisations which were contracted to deliver three levels of servicefrom about 1,200 sites. A second full competitive tendering round took place in1999. This process had a major impact on Job Network contractors, consumedmuch administrative and organisational effort, and resulted in a noticeable dip inperformance. It also resulted in significant changes. In particular the residualpublic sector provider lost its most valuable contracts and there was a markedincrease in the share of the market delivered by church based and voluntarysector organisations. The Jobs Network is now made up of around 200organisations delivering services from just over 2000 sites, although the moreexpensive case management based Intensive Assistance (which can last for up toa year or longer) is only delivered at about half of those sites.

Jobseeker Classification and Job Network Services

In the privatised system access to employment assistance is determined throughthe initial application of a �Jobseeker Classification Instrument�. The classificationprocess is computerised and normally applied by front line Centrelink officers.Apart from completing answers to questions there is little interaction betweenthe client and officer (which is one of the reasons many employment barriers arenot revealed until after the classification and referral process has beencompleted). The client is able to choose which Job Network member they wishto register with, so long as there are places available and they have a preference.Until recently few have exercised a preference. However, it is anticipated thatmore individuals will choose positively as they are now given more transparentinformation about the relative job entry performance of providers through apublicly available �star� system.

The three main services provided by Job Network members are Job Matching,Job Search Training and Intensive Assistance.

Job matching involves finding and filling vacancies. After a transitional periodNetwork members appear collectively to have attracted more vacancies fromemployers but there are rigidities in the system. In particular unemployedpeople can only access information about most notified vacancies by directlyapproaching the individual Network member with whom the vacancy isregistered.

Job Search Training involves a structured course, lasting for up to two weeks,intended to remotivate the unemployed person, update their job search strategyand place them into work. The Government has announced that in future allpeople who have been claiming unemployment allowances for three months willbe required to participate in what is now described as a �Job Search SupportPathway� (FACS & DEWRSB, 2001, p. 8).

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Intensive Assistance (IA)

Intensive Assistance is the most expensive form of provision and combines casemanagement with employment assistance. An unemployed person entering IAis required to draw up a Preparing for Work Agreement. If still unemployedafter 13 weeks the provider is required to draw up a more detailed �SupportPlan� which should include the additional support the provider will be offering.Job Network members have been most innovative in the early stages and havedeveloped a wide range of assessment and remotivation practices that aim toidentify and tackle employment barriers. Surveys with participants andemployers record high satisfaction levels and the OECD suggested that the bestproviders were those delivering �some specialist assessment, light training,counseling in job-search, self-confidence and life directions, etc., in-house� (2001,p.208).

However, evidence from the latest Government evaluation shows that mostactive employment assistance is given in the first few months of participation,the time at which most job entries are secured. As time goes on individual clientcontact with employment officers diminishes and �the intensity of job searchactivity and motivation of job seekers declines� (DEWRSB, 2001, p. 62). TheOECD concluded that many long term unemployed people had little contact withtheir providers and that �few providers appeared to be offering effectiveservices to address the underlying barriers to employment� (2001, p. 118). OneGovernment survey of participants found that less than half of them �had beensent to a job interview or to speak with an employer about a job� (ibid, p. 119),and nearly a quarter of those surveyed had �visited their provider only once ortwice� (ibid, p. 118). This lack of contact is important because participants are notexpected to report regularly to Centrelink whilst in IA.

One independent study, which carried out survey research with front line staff,concluded that it was the incentive structure of the new market that was driving�advisers towards quick, superficial interactions with job seekers and towardsstrategies which maximised the agency�s short-term financial performance�(Considine, 2001, p. 140). Essentially IA providers receive a third of theirpayment in advance; 70 per cent after a participant has been in a job for 13weeks; and a further bonus after 26 weeks. The �up front� payments areimportant to underpin provider viability and profitability, but the paymentsystem encourages advisers to �pick winners� and discourages them to invest inmore expensive services that might tackle barriers but not result in immediatejob outcomes.

IA was never intended to be a �guarantee� program, automatically available toindividuals after a certain duration of unemployment. Instead it is a selectiveintervention targeted at those who are considered to have the capacity tobenefit. This has meant that not only are a significant group of long termunemployed people not eligible for support but that there is constant frictionbetween Centrelink and Network members about who is capable of benefitingfrom the support on offer. This has had a particular impact on the Community

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Support Program, a small scale program which was belatedly introduced by theGovernment for some of those deemed not capable of benefiting from IA.

Finally, there is little provision available for the majority of unemployedAustralians who exhaust their IA entitlement. The front line research carried outby the author also found that few Network members had any procedures inplace to ensure a smooth, let alone an employment focused, �handover� toCentrelink officials for those people who are still unemployed after theycomplete IA.

The impact of the Job Network

The most recent Government evaluation report shows that between May 1998and September 2000 670,000 job matching placements had been effected andmore than one million unemployed people had been referred to IA. In terms ofoutcomes the evaluation reported that three months after leaving 73 per cent ofthose who were �job matched� were either employed (70%) or undertakingeducation and training; and of those leaving Job Search Training or IA theoutcome rates were 47 per cent (38% employed) and 42 per cent (35% employed)respectively (DEWRSB, 2001, p.2). About half the jobs taken were part time.There is little information on what happens to that majority of participants whofail to get a �positive outcome�.

Some data is given separately for younger unemployed people. It shows that 18to 24 year olds made up nearly a third of the commencents in Job SearchTraining, and just under 20 per cent of those who started IA (ibid, Table 3.1).Younger participants did slightly better in terms of job entries than older orother disadvantaged participants, with over a third being in employment threemonths after leaving, evenly divided between those in full and part time work.They were also more likely to exit to education or training with more than one inten taking this route (ibid, Table 4.4).

The evaluation utilised the same post program comparison technique that wascriticised by Stromback and Dockery (2000) to assess the additional net impact ofthe Job Network. The report concluded that IA was securing an additional netimpact of about 10% and Job Search Training was securing about 3 per cent. Theevaluation report asserted that these results were at least as good as thoseproduced under the Job Compact and that they had been secured �at asubstantially lower cost� (ibid). Government Ministers were even less inhibitedand suggest that the results are far better than those produced by WorkingNation (Abbott, 2001, p. 4).

These claims are disputed and, amongst others, ACOSS has maintained that theGovernment has not compared like with like. They conclude that although�competitive tendering was effective in driving costs down .. it weakened servicequality�. The result has been a reduction in support for the most long termunemployed �leading to poorer employment outcomes than the most effective(though not all) Job Compact programs� (Davidson, 2001, p. 1). Whatever the

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relative merits of Job Network and Working Nation programs, the evaluationevidence still confirms that the current Australian employment assistance systemshows poor outcomes for the most disadvantaged job seekers.

One of the most telling criticisms of the Network has been that it has failed toreduce the proportion of long term unemployed �beneficiaries�. In September2000 the number of Australians receiving unemployment benefit for over a yearstood at 385,000, and it was estimated that this number had �barely fallen overthe (previous) five years� (ACOSS et al, 2001, p. 1). The OECD subsequentlyreported that the long-term share of unemployment beneficiaries within thetotal had increased and that in 1999 over 60 per cent had been receiving benefitfor over a year and over 40 per cent had been on benefit for over two years(2001, p. 175). Although there were a number of factors causing this, the OECDsuggested that the complex interplay of screening and IA eligibility rules meant�there is a risk that significant groups are falling through the gaps�.

Mutual Obligation and Work for the Dole

The other major theme of Coalition policy has been to institutionalise newrequirements, activities and programs through which unemployed people canmeet what is described as their �mutual obligation� to the society that pays theirbenefits. This new approach was first applied to the young long termunemployed in 1998; since then someone aged 18 to 24 who has been out ofwork and receiving full benefits for over six months who does not take part insome other approved activity, such as part time work or education, has beenrequired to participate in a �Work for the Dole� project. The projects areorganised by charities, community organisations and local authorities, andparticipants are required to participate for between 12 to 15 hours a week for upto six months, during which they receive an additional A$20 a fortnight.

Work for the Dole is not a conventional employment program although it isexpected to improve �work habits� and incentives, as well as deliver broadercommunity benefits. Few Work for the Dole providers give formal training orhave direct links with employers. It is only now, three years after it wasintroduced, that the Government is introducing some minimal assistance withjob search and giving participants �training credits�, but only after they haveparticipated for at least 16 weeks. In practice the incentive effect of the program,according to Minister Abbott, is expected to work by making regularemployment seem more attractive than continuing to stay on benefits (Abbott,1999).

Official and independent research into Work for the Dole has found that many ofthose who took up places appreciated some of the activities they participated inand the support they got (Sawer, 2001). However, many of the participantsexpressed serious concerns (Kinnear, 2000, p.7):

• many resented the compulsion to participate and most thought the programwould be better if it were voluntary;

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• most participants felt that the Government was not fulfilling its end of themutual obligation bargain; and

• many felt that their Work for the Dole activities were irrelevant to the type ofwork that they were seeking.

In terms of impact, the early evidence showed that the new mutual obligationrequirement had a significant impact on increasing �exit rates� fromunemployment, reducing the inflow to long term unemployment for the clientgroup �by about 25 per cent� (OECD, 2001, p. 28). A Government evaluationsubsequently showed that 30 per cent of Work for the Dole participants were �offbenefit� three months after leaving as against only 17 per cent of a matchedsample of non-participants, giving a net impact effect of 13 per cent. For anumber of methodological reasons the OECD indicates that these results shouldbe treated with caution and other commentators point to data which suggeststhat 80 per cent of Work for the Dole participants were still unemployed fivemonths after completion (Kinnear, 2000).

The main impact of the program is one of what the OECD calls �deterrence� andthree quarters of those referred to Work for the Dole still fail to attend their firstsession. The Government suggests that many of these are likely to have movedinto jobs or were already working. However, there has been little research andnot much is known about where these young people end up, how long they stayin jobs, etc. In the voluntary sector there has also been concern about theinteraction with sanctions and the plight of the most disadvantaged who maynot only lose their benefit but may also lose contact with services.

Nevertheless, the growth of �mutual obligation� activities has been rapid. By 2001a Government Minister was pointing out that Work for the Dole had beenextended to cover all unemployed benefit claimants aged under 40 and about�300,000 long-term job seekers� a year were expected to �participate instructured activity under the Mutual Obligation principle� (Abbott, 2001, p. 5).

The consequence is that by 2001 young long term unemployed Australians werebeing subjected to a new regulatory regime made up of a strange hybrid ofpoorly connected employment assistance and mutual obligation activity. In thefuture it seems that most young unemployed people will be eligible for JobSearch Training and some will be eligible for selective employment assistance. Allwill be required to participate in a �guaranteed� mutual obligation activity aftereach six months of unemployment, with Work for the Dole being the placementof last resort. Although this pattern of provision may appear to be coherent inabstract flow charts, there is already evidence that this emerging, complex andconfusing pattern of support for younger long term unemployed Australians isreproducing the problems already associated with the fragmented provisiontargeted at unemployed 15 to 18 year olds (BSL et al, 2001).

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New Labour, Full Employment and the New Deal for the YoungUnemployed

New Labour was elected in Britain a year after the Coalition came to power inAustralia. It was committed to modernising the Welfare State by remaking therelationship between welfare and work, and within weeks it was implementingits New Deal for Young Unemployed People (NDYP). The subsequent first termof the Labour Government witnessed a succession of radical changes involvingthe introduction of a broad range of employment programs and changes to thetax and benefit system to �make work pay� and tackle child poverty.

It is important to stress that New Labour�s welfare reform policies flowed from afundamental change in the Party�s approach to full employment. By 1997 Labourhad committed itself to introducing temporary job �guarantees� for the long termunemployed and had accepted many of the labour market and social securityreforms introduced by Conservative administrations. A new synthesis of labourmarket programs and an active benefit regime were to be a key element ofdelivering what the Chancellor of the Exchequer describes as �employmentopportunities for all - the modern definition of full employment�. However, in aworld of limited resources, and in the wake of four election defeats, the programon which New Labour was elected had been carefully costed and targeted.Rather than rush to implement a program for all the very long termunemployed - which it was perceived had limited the impact of Australia�s JobCompact - the decision was made to give top priority to a �New Deal� for younglong term unemployed people aged between 18 and 24.

The choice of priority was both pragmatic and one of principle. In Britain, as inAustralia, many of the young people who continue to leave school at the earliestopportunity tend to experience high levels of unemployment and many of theentry level jobs open to them no longer offer routes into stable employment.This exclusion from the labour market has important long term economic andsocial costs. However, while the plight of other groups may be as great there isno doubt that precisely because of their youth the returns for successfulinterventions with this age group are likely to be higher than for others. Assignificantly, New Labour has made it clear that it aims to deliver a sea-change inthe way that people experience and draw on the welfare state and if the objectiveis to change expectations and cultures then it made sense to begin with thosewho were starting out on their working lives.

New Labour and the public Employment Service (ES)

The Labour Government gave the public ES the lead responsibility for deliveringits New Deal programs. Senior ES managers grasped the opportunity to�reinvent� the organisation and invested substantial resources in redefining itsapproach in order to modernise and rebuild its credibility with the unemployed,employers and other agencies. This strategy involved the introduction of a newgeneration of front line New Deal personal advisers; contracting with a broadrange of public, voluntary and private sector organisations for the delivery of

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new services and employment and training options; and changes to ESperformance targets which encouraged it to work with other agencies. Anotherkey dimension to the strategy involved a major national political effort toengage employers and other organisations in the delivery of the New Deals. Inparticular Government created a broad range of national and local partnerships,from the employer led national advisory New Deal Task Force through to thecontractual partnerships which delivered particular programs. Subsequently, theTask Force has been the main �driver� in persuading Government to create moreflexibility and redesign the program to be �demand� rather than program led.

Although New Labour gave the public sector the lead role in delivering welfarereform it has expanded the role of the private sector in the delivery of newservices for those without work. Private sector organisations, in varyingcombinations with the ES, are now responsible for delivering a broad range ofemployment programs. However, while there are continuities with the markettesting and drive to privatisation of the previous Conservative administrationNew Labour maintains that its approach does not represent a prelude to fullprivatisation, but a variation of its partnership strategy. As the new�employment first� Welfare State is created the objective is to work through avariety of public private partnerships to try to harness the resources, expertiseand innovative practices which the Government believes the private sector canbring to the delivery of its broad welfare to work agenda (for a full discussion onNew Labour and �public private partnerships� see IPPR, 2001).

The decision to implement the British Government�s welfare to work strategythrough the public ES was a crucial decision. It provided continuity and it enabledNew Labour to build its programs on the Conservative�s stricter benefit regimewhich by that time was being credited with making a significant contribution tothe reduction in long term unemployment.

New Labour�s Legacy: the Employment Service and its contributionto reducing long term unemployment

In the late 1980s both the British and the Australian approaches to theunemployed had been directly influenced by the developing international, OECDdriven, consensus about the need to move from passive to active benefitsystems. By the early 1990s, British Conservative Governments had reducedbenefit entitlements, introduced new job search requirements and more directlyintegrated the administration of the benefit system with its active labour marketprograms. In 1996 this culminated in the replacement of unemployment relatedbenefits with a new Jobseekers Allowance, which was itself in part modelled onthe Jobstart and Newstart Allowances introduced in Australia in the late 1980s.

The new strategy towards the unemployed had been preceded by radicalinstitutional changes that Conservative Governments made to the�unemployment market�. However, while training programs for theunemployed were handed over to newly created private sector led Training andEnterprise Councils, a �modernised� public Employment Service was created in

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1987 with about 35,000 staff and a front line national network of over 1,100Jobcentres. The ES worked closely with the larger public sector Benefits Agencywhich was responsible for the assessment and delivery of most social assistanceand insurance benefits. The BA, however, had no role in delivering directemployment assistance.

During the 1990s the role of the ES, its aims and objectives and the nature of itsactivities changed significantly. Four key trends characterised the policyenvironment that the ES worked within. The first trend was the emphasis onreinforcing work incentives and maximising and monitoring the job seekingbehavior of the unemployed. This was underpinned by what the ES called the�stricter benefit regime�. The second trend was the shift towards a �work first�system marked by a move from more resource intensive, longer term, activelabour market programs towards low cost measures aimed at immediate jobsearch and job entry. The third trend was a performance targets regime whichwas increasingly geared to immediate job entry, benefits policing and theimposition of sanctions. Finally, the ES was under constant pressure to reduce itsoperating costs and obtain better value for money.

Over a ten year period the ES achieved its efficiency savings through acombination of market testing, contracting out, cost reviews and othertechniques such as business process re-engineering (Fletcher, 1996, p.174). Corefunctions, like job broking, benefit administration, job search reviews andprogram placement were kept in-house, but by 1996 the ES had withdrawn frommost direct program provision and, through its Regional Offices, contracted outits various schemes via competitive tendering and performance related contractsto a diverse range of private providers, voluntary sector organisations, colleges,Local Authorities and religious groups.

By 1996 the British ES was promoting itself as a high performance and highachievement agency, with a reputation for implementing new national initiativesto short timescales. It was able to show that it had been administratively effectiveand had made a significant contribution to reducing unemployment, especiallylong term unemployment, by engineering a close link between job-broking andbenefit administration (ESC, 1999, vol. I, p. xi). Indeed, it was precisely thesuccess of this link that persuaded the last British Conservative administration toretain the core activities of the ES within the public sector, notwithstanding anideological commitment to privatisation (Price, 2000, p. 304).

There was strong evidence to support the position of the ES. Between 1992 and1997 the number of people in work in Britain increased by more than a millionand a half. Over that period registered UK unemployment fell rapidly from apeak of nearly 3 million in 1993 to less than 1.7 million in April 1997. Thereduction in long term unemployment was even more dramatic. The numberregistered out of work and claiming benefit for over twelve months fell from ahigh point of over a million in October 1993 to just over 350,000 in October 1998.Over the period the proportion of people registered out of work for over a yearfell from 38 per cent to 27 per cent. The relative decline in long termunemployment is clearer if a comparison is made between the last two economic

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cycles, which saw unemployment peak in 1985/86 and in 1993/94. In the mostrecent cycle the level of overall unemployment peaked at a total five per centlower than in the previous cycle. However, the 20 per cent �peak to peak� fall inlong term unemployment was much greater (ESC, 1999, vol II, p. 184).

There has been much controversy about what happened to the people assumedto have benefited from the dramatic reduction in long term unemployment.Sanctions increased, some of the long term unemployed were �churned� throughprograms, others were placed in short term jobs, and many of the older longterm unemployed were transferred to other benefits. However, the evaluationevidence does confirm that the new benefit regime did stimulate active jobsearch and was more effective at linking unemployed people with new jobopportunities (Rayner et al, 2000; Wells, 2000).

Despite the success of the Conservative�s �stricter benefit regime�, in 1997 theNew Labour Government was to inherit significant problems. Long termunemployment continued to blight many disadvantaged areas; and nearly one infive UK households of working age had no one in work. On the ground therewas also considerable dissatisfaction amongst front line ES staff and widespreadscepticism about Government employment �schemes� amongst the unemployed,employers and providers (EPI, 1998; Finn et al, 1998; Bentley et al, 1999).

The New Deals and Welfare to Work

By 2001, at the end of its first term of Government, New Labour had developeda comprehensive approach to reforming the Welfare State which was aimed attackling the legacy of worklessness and child poverty that it had inherited. Thecreation and introduction of the New Deal for Young Unemployed People was atthe forefront of these changes and became the template from which otherprograms have been developed.

The program itself arose directly from New Labour�s explicit 1997 electionpledge which committed the Government to getting 250,000 long termunemployed young people into work. The new program was financed through a£5 billion �windfall tax� raised from the excessive profits of utilities which hadbeen privatised by previous Conservative Governments. Much of this extrafunding was allocated to the NDYP but the New Deal approach was alsoextended to other groups and by 2001 there were New Deal programs for long-term unemployed adults aged over 25, lone parents, disabled people, those agedover 50 and the partners of unemployed people. Although each New Dealaddresses the particular problems of a specific client group they are all based onthe principles which were first implemented in the program for young people -�more help, more choices, and the support of a Personal Adviser .. matched by agreater responsibility on the part of individuals to help themselves� (DfEE, 2001,para 1.33). However, it is important to stress that only the New Deals for theunemployed are mandatory.

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The New Deal for the Young Unemployed

The NDYP was implemented nationally in April 1998 since when all 18 to 24 yearolds who have claimed JSA for six months have been �guaranteed� places on theprogram. There are early entry rules for particular groups, such as ex-offenders,who face particular barriers to employment, but the primary method forensuring that employment assistance is more efficiently allocated to those whoneed it has been to use duration of unemployment. Both Conservative andLabour British Governments have been sceptical about the predictive power ofscreening systems and have been wary of introducing something like thecomplex classification system in use in Australia.

Initially unemployed young people participate in a �Gateway� period which canlast for up to four months. During this period they should have weeklymeetings with a New Deal Personal Adviser (NDPA) who is expected to referthose who are �job ready� to appropriate unsubsidised vacancies. The advisershould identify and try to tackle any employment barriers of those who are not�job ready�. There is some specialist ES provision but ideally NDPAs should be�networked� so that they are aware of other local service provision and be able torefer those young people who need it to other specialised support, for example,in literacy or numeracy training, debt advice or substance abuse programs. Afterfour or five weeks most young people are required to attend a two week fulltime mandatory �Gateway to Work� course. This is intended to increase the �paceand intensity� of the Gateway and assists the young person with job search and,if necessary, with the option choices they have to make if not placed in anunsubsidised job.

The aim of the subsequent �options� phase has been to provide full time workexperience and training to improve the employability and human capital of thoseyoung people who could not be placed in unsubsidised employment. Between1998 and 2001 the options could involve either a subsidised job, normally in theprivate sector, where an employer received a subsidy of £60 a week for up to sixmonths (some young people were able to try self employment under a variant).Alternatively young people could be offered six month placements in either theEnvironmental Task Force (ETF) or the Voluntary Sector Option (VSO) wherethey could be paid a wage or more usually their normal benefit payment plussome £15 a week. All the young people were required to receive approved onthe job or day release education and training. The final option was full timeeducation or training for up to a year on �an approved course� for young people�without qualifications�. Once placed in an option there was little opportunity toswitch to another.

NDPAs are expected to monitor the progress of young people in the options andto provide structured �follow through� support for those who fail to get a job.Follow through provision can involve access to additional support, such as anemployment subsidy, as well as help with active job search. Young people thenre-enter the New Deal after another six months unemployment or earlier if theindividual is in a special group.

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The NDYP is a mandatory program and Government Ministers made it clearthat there was to be no �fifth option� of staying on benefit payments indefinitely.Those young people who either fail to attend interviews, refuse to take up anappropriate opportunity or who leave without good cause are now liable toescalating benefit sanctions which can increase from a two week to a six monthwithdrawal of payments.

Compulsory New Deals for the older unemployed and EmploymentZones

Although the NDYP is a national program the Government�s approach totackling the barriers faced by the much larger number of long term unemployedpeople aged over 25 has been more experimental and incremental. In effect theGovernment is testing several approaches and is using detailed evaluations,including random assignments, on which it will decide the future shape of itsprograms. The main approach to the 25 year plus long term unemployed isdirectly based on the New Deal model. The other �Employment Zone� approachis area based and seeks to maximise performance by giving local flexibility anddiscretion to private sector contractors who are paid according to performance.

1

In 1997 New Labour introduced a minimal New Deal program for those agedover 25 who had been out of work for over two years, but this was swiftlysupplemented by a broad range of pilot initiatives which tested more intensiveapproaches. In April 2001 this development work led to the implementation of acomprehensive and mandatory New Deal program for unemployed peopleaged between 25 and 50 who have been out of work for 18 months. Thisinvolves a Gateway period, a subsequent mandatory period of structured fulltime activity, and follow-through provision. The tougher sanctions regime whichapplies to NDYP has also been extended to the older age group so that noperson out of work for over 18 months now has the option of remaining onpassive social assistance payments.

The alternative Employment Zones (EZs) are also aimed at JSA claimants agedover 25 who have been out of work for over 18 months (or 12 months in a fewzones). If an individual is selected then participation is mandatory. The Zoneshave been introduced in selected high unemployment areas where theirperformance is being directly compared with the New Deal approach. In theZones individual benefit payments are combined with resources for activemeasures into what have been called �personal job accounts�. The EZs aredelivered by private sector contractors who deliver three stages of support.There is an initial advisory process, which can last for up to 13 weeks, aimed attackling immediate employment barriers, identifying objectives and agreeing a 1 Another interesting area based approach has been implemented in fifty areas in the form of �Action

Teams for Jobs� (DfEE, 2000a). �Outreach� teams of ES advisers work with local groups andemployers to �support radical, innovative ways� of tackling �specific local problems and obstacles tojob matching�. The teams assist all �jobless� people on a voluntary basis and over the next threeyears their effectiveness will be assessed through the improvement they can make in localemployment rates.

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costed Action Plan using the Personal Job Account. One of the most distinctivefeatures of the approach is that an Adviser and participant together agree howthe funding in the Personal Job Account can best be used to overcome specificemployment barriers. The second phase of carrying out the Action Plan can lastfor up to six months and can involve a range of assistance, from training throughto employment subsidies. The third step is to provide support once theindividual is in work to ensure the employment is sustained.

EZ contractors are paid through an output related funding regime, but it issignificantly different to that used for IA in the Job Network. Initially, EZproviders receive a starting fee of £300 and are then advanced the equivalent of21 weeks average benefit, out of which they must pay the client�s benefit for upto 26 weeks. The provider keeps the residue if the client is placed in work before21 weeks but has to make up the shortfall if the client remains unemployed.About £500 is payable on job entry and approximately £2,000 is payable after 13weeks retention in a job. Apart from the Personal Job Account the mostsignificant contrast with Australia is that EZ contractors have no other privatesector competitors in those areas where they are awarded contracts.

The new �25 plus� programs were designed on the basis of the evaluationevidence that was generated through the initial pilots and prototypes. Thequantitative results indicated that the new interventions were accelerating thereturn to work of the long term unemployed, but the qualitative evaluationreported that there was a more limited impact on the �hardest to help�(Lissenburgh, 2001; Winterbotham et al, 2001). The real test of the nationalprograms will be the extent to which they can sustain the �net impacts� obtainedin the experimental phase, and meet the needs of those with greatestemployment barriers. Some of the initial operating data is encouraging but it istoo early to assess whether the programs for the older age group can sustain theimpacts that evaluation studies have attributed to the NDYP.

The impact of the New Deals

In broad statistical terms by the end of July 2001 just under half a million peoplehad found jobs in the UK through the Labour Government�s various New Dealsand related employment initiatives. The bulk of these jobs were secured throughthe NDYP. Between 1998 and July 2001 594,300 people had passed through theprogram of whom over 40 per cent were known to have entered jobs, of whomjust over 80 per cent had not reclaimed benefits for 13 weeks (TEN, 2001, p.1).Just over 10 per cent had transferred to other benefits; one in five had left toother �known� destinations (such as, full time education); and nearly 30 per centhad entered �unknown destinations�. There were just 89,300 actively participatingin the program, of whom nearly 60 per cent were still in the Gateway.

The combined impact of the program and strong employment growth has seenyouth unemployment fall dramatically. The number of 18 to 24 year olds inBritain who were out of work and claiming JSA for less than 26 weeks fell from216,514 in April 1998 to 193,588 in April 2001, a fall of just under 11 per cent. The

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number out of work for over six months, at which point they enter the NDYPbut are still receiving JSA, fell more sharply from 66,638 to 34,463, a fall of 48 percent. However, the most dramatic impact was on those unemployed for over ayear where the number fell from 46,629 to 3,595, a fall of over 92 per cent. Usingthe more rigorous international (ILO) definition of unemployment, on datacollected from the household based Labour Force Survey (which includes thosewho are unemployed but not eligible for JSA) the number of young peopleunemployed over six months had fallen less dramatically to 127,000 in theMarch-May 2001 quarter from 221,000 in the February-April 1997 quarter. Oneclear implication is that the program is effectively targeted at those who claimbenefits.

The dramatic reductions in registered long term youth unemployment havebeen welcomed by Ministers, but establishing the net additional impact of theNDYP, the actual difference it makes, is more complex. In both Britain andAustralia there is a growing literature, and growing expertise, as economists andother social scientists have utilised a broad range of micro and macro economicevaluation techniques to identify the impact that particular employmentprograms have secured. The results give mixed messages and there is muchdebate about the most appropriate techniques and the interpretation of findings(Schmid et al, 1996; Martin, 1998). However, while there is no space to evaluatethe general evidence in this paper, there are results from two macro economicevaluations of the NDYP which suggest that it is having a positive impact on theBritish labour market.

The two studies were carried out by the National Institute for Economic andSocial Research (Anderton et al, 1999; Riley and Young, 2000). In their secondreport the NIESR researchers point out that one way of estimating the actualimpact of NDYP on youth unemployment is to compare youth unemploymentrates with unemployment rates in other age groups. In the two years prior tothe introduction of NDYP that ratio of youth unemployment to otherunemployment was stable. However, in the two years following theintroduction of NDYP, this ratio had fallen steadily. The authors argue that �ifthe ratio of youth to other unemployment had remained stable through toMarch 2000, it would have been thirty thousand higher than it actually was�(Riley and Young, 2000, p.22). They also estimated that NDYP had reduced longterm youth unemployment by around 45,000 and estimated it would have beenalmost twice as high without the program. Looking at employment rates Rileyand Young also estimate that, after two years, NDYP had increased employmentin the youth labour market by 15 to 17 thousand.

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The acceleration in the decline of youth unemployment since 1998 and the jobentry rate secured through the program suggests that the NDYP has beeneffective in helping young people into work. However, it is inevitable that someof those young people would have found work without New Deal: either as aresult of natural labour market turnover or because of the general expansion inthe economy. In their last report NIESR estimated that �of those leavingunemployment, between 50 and 80 per cent would have done so in the absenceof the program� (Riley and Young, 2000, p.20). This was consistent with theirearlier estimates of the degree of deadweight in NDYP of around 60 per cent(Anderton et al, 1999, p.72). NIESR also concluded that the overall substitutioneffect was small, partly because of the relatively small size of the youth labourmarket.

The NIESR report concluded that the main impact of the program had beensecured because it helped young people leave unemployment earlier than theywould otherwise have done. Indirectly it was also likely to have reduced wagepressures and �so allowed the economy to grow faster without triggering policyaction to restrain inflation� (ibid, p. 2). They estimated that the annual exchequercost per extra person in employment was about £7,000 per annum. However,they point out that �national income was around £.5 billion per annum higher asa consequence of the program� and this made no allowance for the wider socialbenefits that were also likely to have been generated. They concluded thatoverall the NDYP was �having a beneficial impact on the UK economy�.However, they also warned that the impacts they found might not be sustainedas more people pass through New Deal programs or when �the economicbackground turns less benign� (Anderton et al, 1999, p.17).

What works in the New Deal: Opening the �black box�

The New Deals have been subjected to one of the largest and most publiclyavailable programs of labour market evaluation undertaken in Britain. The EShas underpinned its evaluation strategy through the creation of a comprehensiveNew Deal evaluation database, which enables it to track every individual whostarts on the New Deal, and by mid-2001 over 40 evaluation reports had beenpublished assessing both the micro and macro impacts of the program.

The cumulative evidence from the New Deal evaluation strategy has been ableto shed light on those parts of the program which have worked well and thosewhich have experienced most difficulty (Hasluck, 2000a; Hasluck 2000b; Millar,2000). These findings have been absorbed into and used as part of theGovernment�s �continuous improvement strategy�:

• The Gateway period of intensive advice and assistance has been effective inmoving young people out of unemployment. Early planning assumptionswere that 40 per cent of entrants would leave the New Deal from theGateway. In reality two thirds of participants leave before taking up anoption. If the results of surveys of those categorised as leaving to �unknown

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destinations� are included, over 60 per cent of those who leave in the Gatewayphase have been taking up jobs (ORC, 2001).

• Participation on the Gateway is leading to more jobsearch. The evidenceshows a �carrot and stick� effect, with most young people intensifyingjobsearch as a result of increased motivation and new techniques, but othersdoing so in order to avoid joining an option or to avoid benefit sanctions(about 10 per cent sign off JSA before attending a first interview).

• Personal Advisers are playing a critical role. The evaluation evidence hasconsistently identified the intensive, individualised help from the NDPA as thekey element of Gateway success. Young people themselves place great valueon having someone with whom they can build a relationship. At their bestadvisers provide a wide range of individualised services for the young personsuch as identifying barriers to work, helping with applications, contactingemployers and discussing and clarifying employment goals. Unfortunately,not all NDPAs live up to their image and there have been concerns about thework pressures being placed on them by rapid policy changes and becausetheir caseloads have a greater proportion of those with more complexemployment barriers. There has also been concern amongst NDPAs about thebalance that has to be struck between individual support and immediate jobplacement. One of the things that had been most valued about the New Dealwas the shift away from the immediate job entry targets that hadcharacterised the previous regime. However, by 2001 many both inside andoutside the ES felt that the original individual focus of the NDYP was indanger of being undermined by a preoccupation with immediate job entrytargets.

• The performance of the options has been mixed. Option providers havestruggled to place more than 30% of their participants into jobs. This underperformance has been partly attributable to the fact those entering theseoptions have the greatest employment barriers and least motivation but it hasalso reflected the tension felt by many providers about the extent to whichthey should or could fully focus on employment outcomes. �Fixing� this partof the program, so that more of those with the greatest barriers obtain jobs,remains a major implementation challenge for the �next phase� of the NewDeal.

• The impact of the follow through period has been limited. Research with

young people found �marked differences� in the levels of follow throughactivity which ranged from �intensive support to no identifiable post optionactivity�. Nevertheless, around 40 per cent of those leaving the followthrough have been moving into employment. Unfortunately this also meansthat about half of those leaving follow through have been returning to thenormal JSA regime or have been early re-entrants to the New Deal.

• Sanctions, unknown destinations and the most disadvantaged. There has

been much concern about the impact that the New Deal disciplinary regimemight have on the most disadvantaged young people. However, there is no

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comprehensive information available about mandatory referrals or theapplication of sanctions, although the evaluation evidence shows that mostdisallowances are imposed for the failure to attend interviews and mostsanctions are imposed on poorly educated young men referred to workexperience placements in the environmental sector (Bonjour et al, 2001, pp112-115). Research into those young people who had left to unknowndestinations found that nearly one in five, 19 per cent, indicated that they hadexperienced at least one of the living conditions associated with disadvantage(been in custody; slept rough; lived in a hostel/foyer; been in care).Significantly, only 29 per cent of this group reported that they had left NDYPto enter full time employment (ORC, 2001). On the ground local New Dealpartnerships and national voluntary organisations have initiated outreachprojects to connect with this group and in Scotland various forms of pre-NewDeal provision have been tested to create pathways that enable the mostdisadvantaged to tackle barriers prior to entry to the New Deal.

There is also evidence that the partnership approach to implementing the NewDeal has added real value. In many localities the establishment of common goalsand the interaction between the key local players seems to have improved theeffectiveness of New Deal programs by allowing the partners to minimise waste,duplication, and deadweight and substitution. At their best, for example in thefirst wave of Employment Zones, local partnerships helped free the forces ofinnovation and experimentation (CSI, 2000). In other areas partnerships haveensured that the New Deals become part of a more extensive and accessiblerange of local services provided through the creation of �one stop shops� andintegrated back to work strategies.

NDYP: Next Phase

The NDYP has been implemented in a period of employment growth withfalling youth and long term unemployment. This has had significant impacts onboth the eligible client group and on the viability of those organisationsdelivering options. However, the Government has tried to speedily adapt theprogram through a process of regular independent and open inspection reportsand an overall �continuous improvement� strategy. These incremental changesare now accelerating into what has been characterised as the �Next Phase� of theNew Deal (ES, 2001).

This next phase of NDYP aims to provide more assistance to the hard to placeindividuals who make up an increasing proportion of a shrinking client groupand to ensure that the program is �demand led� by developing more effectivesectoral links with employers. Some elements of the program have beenchanged nationally, involving initiatives such as an �Advisors Discretionary Fund�which gives NDPAs greater flexibility in spending small amounts of money (upto £250) that can help tackle immediate employment barriers (such as paying forwork clothing or equipment, or driving lessons, etc.). However, much of thedevelopment is being driven through a patchwork of pilot initiatives. One of themost significant is �tailored pathways�, where some nineteen areas are being

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encouraged to break down the existing non-employer based �options�, whichhave been too rigid, to allow for more individually tailored provision involvinggreater access to subsidised jobs. The other pilots are exploring new approachesto tackling alcohol and substance abuse, to using mentoring, through to creatingwage paying �transitional employment� projects for the �hardest to help� (DfEE,2001, p. 35).

A new funding model has also been introduced for the options phase of the NewDeal, and for most other ES programs, which attempts to reflect the lessonslearned from the output related funding models of the 1990s (where up to 80%of funds were only paid after evidence that a person had been in a job for 13weeks). The aim is to both give providers an incentive to get an individual into ajob but to also enable them to tackle underlying employment barriers. Under themodel the ES pays a fixed amount for provision and providers compete onquality and projected outcomes rather than price. The unit costs have been set toreflect the expectation that only 40% of clients will achieve jobs and also anexpectation of the average number of weeks a client is likely to stay on a givenprogram. Providers receive 70% of the per capita funding as a program fee withthe remainder paid on job entry. Currently none of the output element isdependent on the client remaining in work, although there are a range of pilotsexperimenting with payment systems linked to job retention. The ES didconsider varying the funding levels according to client group, but ruled it out onthe grounds that it would be overly bureaucratic and would encourage�creaming�.

Welfare Reform and the �Economically Inactive�: Participation andEmployment First

At the same time that the Governments of both countries have transformedtheir employment assistance systems they have also been engaged in broaderdebates about the future of their social security systems. The unifying theme hasbeen how to tackle the increased social, economic and financial costs that areassociated with the increased numbers of working age people who are reliant onthe benefit system. In Australia the Government estimated that by 2000 over 2.6million working age people were reliant on state benefits and 60 per cent ofthose recipients were �not required to look for work or contribute to theircommunities in any way� (FACS & DEWRSB, 2001, p. 4). In Britain it wasestimated that in 2000 there were still around four million working age benefitrecipients in addition to the one million still on unemployment benefits (DfEE,2001, p. 29). The vast majority were �economically inactive�, either on sickness ordisability benefits (2.9 million) or lone parent benefits (900,000).

In Australia the Government initiated a broad consultative process in 1999intended to cultivate a consensus about how to tackle these and related issues.The final report of the Reference Group on Welfare Reform (McClure Report,2000) concluded that there was a need for radical reform and that the broadsocial security system should introduce new services and requirements whichwould promote economic and social participation. In particular the Group

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proposed that a �central gateway and assessment process� should provideindividualised service delivery; the benefit system should be simplified; and thereshould be incentives to encourage and support participation. They endorsed themutual obligations approach but stressed that this should extend across thecommunity, and not just be imposed on those receiving benefits.

In response the Government proposed a less ambitious program in �AustraliansWorking Together� which outlined a four year plan aimed at creating a new�balance between incentives, obligations and assistance� (FACS & DEWRSB,2001, p.2). This has involved some marginal changes in employment assistance; afurther extension of the �mutual obligation� through Work for the Dole; and theintroduction of new �participation� requirements. Initially lone parents will berequired to attend annual interviews and those whose youngest child has turned13 will have to engage in up to six hours activity a week. Paradoxically, althoughCentrelink will still have little direct input into improving the employability ofthe unemployed it has been charged with introducing a new �personal adviser�service for those working age benefit recipients who are furthest from thelabour market. Amongst other initiatives this is linked with a new 45,000 placeParticipation Support Program (which replaces the 15,000 place CSP).

By contrast the British welfare reform debate has been directly driven byGovernment, and articulated in a series of Green and White Papers. Theapproach is unambiguously about employability, job entry and labour supply. Anew 80,000 strong public sector Working Age Agency, formed through a mergerof the ES and Benefits Agency, has now been given the objective ofimplementing an �employment first� system for all those of working age whoneed to claim state benefits. Formerly �inactive� claimants are being required toattend employment focused interviews with personal advisers who have accessto �barrier breaking� services including the full array of voluntary andmandatory New Deal programs. The aim of the system is to both increase thesustainable level of employment by improving the employability of morebenefit claimants and placing them into work, and to change the culture of thebenefits system towards independence and work rather than what has beencharacterised as the passive payment of cash benefits (DfEE, 2001).

Conclusion: Implications for the Australian Welfare to Work system

In Australia and Britain the impetus behind broad welfare reform is irreversibleand is being driven by powerful political, social and economic forces. However,while there may be a broad political consensus in both countries around generalobjectives there is fierce debate about �what works� and about the success oftheir respective approaches towards the long term unemployed and othergroups. Both systems have their strengths and weaknesses and it is alwaysdifficult to extract the lessons that one country specific approach may have foranother. Nevertheless, the following conclusions about the Australian systemseem warranted:

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1. Centrelink has demonstrated that it is a high performance, innovative publicsector agency. However, the Australian system needs a stronger, more directpersonal and administrative connection between benefit eligibility, job searchand participation in labour market programs. Centrelink may be an effective�one stop shop� for the assessment and payment of benefits, but it plays a farless effective role in stimulating job search, in tackling employment barriersand in ensuring that unemployed people are matched with appropriateprograms. These weaknesses were explored in the McClure report but thelimited personal adviser service that it proposes for lone parents and othersshould be extended to the long term unemployed.

2. Australian automated program referral systems may be technically

sophisticated and less costly, but they are not getting the message across tosignificant numbers of clients. Mandatory attendance at adviser interviews inCentrelink would generate the same �shake out� effect secured through theexisting system, but it could also ensure that appropriate and matchedreferrals were taking place, and they might reduce the excessive and too ofteninappropriate breaching that is being generated by the existing system. Theywould also reduce the �no shows� that bedevil providers. At the same time,front line Centrelink advisers should be the focus of an organised procedureto �follow through� and capitalise on improvements in employability that mayhave been secured by unemployed people who are not placed in jobs throughtheir programs but who currently �go back to zero� when they return to theunsupported job search regime.

3. The most basic function of an employment service is to provide access to

vacancies and other labour market information. It can be argued that this is asimportant a contribution to the functioning of the labour market as placementservices. Ideally it helps ensure both equitable access to labour marketinformation and increased quality and efficiency in the matching process.Although most unemployed Australians can access notified vacancies througha computerised system, with access points in Centrelink offices, a largemajority of the vacancies are �semi open�. Job Matching providers usuallyretain the employers details, so job seekers interested in a vacancy have toregister with them. This can mean physically registering with severalproviders, in different locations, if the job seeker wishes to pursue more thanone vacancy. This can cause inconvenience, especially if the vacancy is filled,and it creates new rigidities in the labour market. It also seems perverse thatunemployed people cannot access the information they need from their �onestop� Centrelink office! It would seem more reasonable to re-integrate basicjob matching and vacancy handling into the core public service agency thatmost benefit recipients have regular contact with. This could enhance theservice that Centrelink can offer, enable it to utilise the new technologies thatare transforming the job matching process, and free up Job Networkmembers to focus on placing those who have significant employmentbarriers.

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4. Even if Job Network providers secure more cost effective results thancomparable Working Nation programs the reality is that large numbers ofparticipants return to unemployment even when placed with the bestproviders. Many successful participants also move into entry level jobs but,apart from minimal follow up (principally designed to ensure that outcomepayments are secured), there has been little stress on how that first job mightbecome the route to a better job. Output related payments need to besupplemented with other mechanisms to ensure that providers place greateremphasis on improving job �retention� strategies, to ensure that participantskeep the jobs they enter; on �progression�, where skill training and follow upsupport can assist those who do take entry level jobs to be able to makeprogress to higher paid and more secure employment; and on a �followthrough� process, to get effective assistance to those who come to the end oftheir placements without a job. In this context it would be valuable to learnlessons from some of the high performance welfare to work �intermediaries�that are emerging in the USA and Britain which are both client focused butalso employer/demand led (NDTFI, 1999; Pinto-Duschinsky, 2001).

5. Privatisation and competitive pressures in the Australian Job Network have

reduced transparency and limited the capacity of Government and providersto share knowledge about successful practices and back to workinterventions. This has been compounded by an official evaluation strategythat has been limited to the production of broad reports which have beenmore concerned with measured impacts than with the processes by whichthey have been secured.

2 By contrast, the British approach has been to engage

independent evaluators who through case studies, interview and surveybased research, have directly explored impacts and what has been takingplace inside the �black box� of actual provision, and to then use these findingsto immediately inform the development of policy and practice. Theknowledge of providers and practitioners, and the performance of theAustralian system, would be improved by a more open and comprehensiveevaluation strategy. A complementary, or alternative, approach would be toadapt something like the competitive British New Deal Innovation Fundswhich act as a stimulus to providers to test local innovation and to make theresults publicly available to all providers.

6. Both the UK and Australia have stressed the significant role that will have to

be played by broad partnerships if the rhetoric of welfare reform is to betranslated into effective action and the emerging system be able to coordinateand deliver the range and depth of services needed to tackle the employmentbarriers of the most disadvantaged. Yet the Australian employment assistanceand participation system is competitive and fragmented, partnershiparrangements are weak, and there are few linkages between federal and stateprograms. Stronger local partnerships are needed, especially in areas of

2 The Australian Government published the first of three proposed evaluation reports on the

performance of the Job Network in May 2000. The second was released in June 2001. The thirdreport, examining the broader effectiveness of the Network in securing sustainable employment - theonly one which will be �independent� and not produced �in house� - has yet to be commissioned. It islikely to be published in mid-2002, after the 2001 federal election.

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highest unemployment, to both �join up� existing multiple local interventions,create synergies and avoid duplication.

7. The emerging Australian system is sending mixed messages to theunemployed and those working with them. The combination of selectiveemployment assistance, comprehensive participation focused mutualobligation requirements, and various exemptions and exclusions, is creating aconfusing and complex hybrid, especially for the younger long termunemployed. The British New Deal approach offers no simple �off the shelf�solution, but the progress made with the program for young people doesillustrate some of the gains that can come from a more comprehensive andcoordinated approach. The NDYP also shows that mandatory programs canhave strong client and provider support if delivered in the right way and ifseen to be offering genuine choice and employment opportunities. It may notbe a revolution but simply introducing front line employment advisers inCentrelink and systematically �joining up� existing job search, employmentassistance, Work for the Dole and training programs into a comprehensivejob focused system could start to deliver something like a New Deal for longterm unemployed Australians.

Finally, employment programs and benefit regimes matter. Whether it be theinclusive, citizenship based, New Deal model, or the selective assistance of theJob Network, the principle of helping those at a disadvantage in the labourmarket is relevant at all stages of the economic cycle. In most areas the labourmarket is not static and even at the lowest point of recent recessions most peoplewho become unemployed still leave unemployment quickly. The task is toensure that all those who become detached for longer periods are giveneffective assistance so that they are not excluded from the opportunities that doarise especially when economic growth generates new opportunities. That is thechallenge that must be met more effectively by the emerging Australian �welfareto work� system.

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